The German Federal Labor Court decided in an eagerly awaited ruling that crowdworkers or microtaskers can be classified as employees under German employment law. The decision will likely have significant impacts for the so-called gig economy. Although the ruling will not render the business model entirely impossible, platform operators will have to review and possibly reconsider their processes.
Regional Labor Court Denied Employee Status
In the pre-instance ruling, the Regional Labor Court Munich considered the crowdworker to be self-employed. The crowdworker earned approximately EUR 1,800 per month with orders by the platform operator and carried out almost three thousand orders within eleven months, mainly relating to control tasks regarding the presentation of goods in retail stores. Disagreements with the platform operator resulted in the platform operator announcing that the crowdworker’s account would be closed. The crowdworker, not accepting this factual termination of the contractual relationship, demanded continued employment and the payment of outstanding remuneration. He claimed that he was employed as an employee and could therefore not be terminated without further written notice.
The Regional Labor Court had held that the crowdworker was self-employed, denied his employee status and based its decision on the argumentation that the crowdworker was free to accept or decline orders.
Crowdworkers Can Be Employees
The Federal Labor Court now considered the crowdworker in the present case an employee. Even though the Court recognized that the crowdworkers were not contractually obliged to accept orders from the platform, they nevertheless carried out work in a manner typical for employees, being bound by instructions and personally dependent on the platform operator. The organizational structure of the platform is designed in such a way that registered crowdworkers continuously have to accept several specified orders to complete them personally. If crowdworkers want to carry out several orders at the same time, in order to complete them on one route and thus achieve a higher hourly income, they must have achieved a higher level in the rating system, which was only possible after having carried out a certain number of orders. In the Court’s opinion, this rating system sets incentives for the crowdworkers to continuously perform activities for the platform operator that show the crowdworkers’ integration into the platform operator’s business.
Case Not Yet Closed
Because the platform operator had announced the termination of the possible employment relationship as a precautionary measure during the dispute, the crowdworker was not entirely successful and the employment relationship has been terminated effectively. The amount of the remuneration owed to the crowdworker must now be determined by the Regional Labor Court since the Court noted that the crowdworker cannot easily demand remuneration in accordance with his fees previously received as a crowdworker. If a contractual relationship subsequently turns out to be an employment relationship, it cannot be assumed that the amount of the agreed fees was also agreed as remuneration in an employment relationship.
The Federal Labour Court at the end has not made a general classification of the crowdworkers’ status. The classification continues to depend on an overall assessment of the specific circumstances. However, the Court’s ruling indicates that the more a platform operator provides incentives to accept more and more orders, the more likely it is that crowdworkers will be classified as employees.
In any case, the incentive systems used by platform operators now pose a threat to the business model and should be double-checked. The integration into the business and specific instructions for completing the orders carry the risk that the crowdworkers may qualify as employees. This is accompanied by corresponding employee-protection rights such as vacation claims, protection against dismissal, continued payment of remuneration, etc. As employers, the platform operators will additionally have to pay social security contributions.
Political action is being taken as well and the German Minister of Labor and Social Affairs, Hubertus Heil, has announced plans regarding regulations to protect crowdworkers in the gig economy. Among other things, he is considering a compulsory pension insurance for crowdworkers, continued payment of remuneration, maternity leave and vacation, as well as notice periods and a simplified way to clarify their employment status.
Please feel free to reach out to our Employment Team in Germany or your usual contact at Orrick to find out more or if you need any help.